FIRST FINANCIAL BANKSHARES INC

Previous wording

the effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”);

Current wording

the effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the implementation of tariffs and other protectionist trade policies;

Previous wording

As a financial holding company, we generate most of our revenue from interest on loans and investments, wealth management fees, gain on sale of mortgage loans and service charges and fees on deposit accounts. Our primary source of funding for our loans and investments are deposits held by our bank subsidiary, First Financial Bank. Our largest expenses are interest on deposits and salaries and related employee benefits. We measure our performance by calculating our return on average assets, return on average equity, regulatory capital ratios, net interest margin and efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax equivalent basis and noninterest income.

Current wording

As a financial holding company, we generate most of our revenue from interest on loans and investments, wealth management fees, gain on sale of mortgage loans and service charges, interchange income and fees on deposit accounts. Our primary source of funding for our loans and investments are deposits held by our bank subsidiary, First Financial Bank. Our largest expenses are interest on deposits and salaries and related employee benefits. We measure our performance by calculating our return on average assets, return on average equity, regulatory capital ratios, net interest margin and efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax equivalent basis and noninterest income.

Previous wording

The prior authorization had been in place since July 27, 2021. The stock repurchase plan authorizes management to repurchase and retire the stock at such time as repurchases and retirements are considered beneficial to the Company and shareholders. Any repurchase of stock will be made through the open market, block trades, or in privately negotiated transactions in accordance with applicable laws and regulations. Under the repurchase plan, there is no minimum number of shares that the Company is required to repurchase. There have been no repurchases during 2025 or through June 30, 2026.

Current wording

On July 28, 2026, the Company's Board of Directors renewed and increased the size of the authorization to repurchase up to 7.2 million common shares through July 31, 2027. The prior authorization to repurchase up to 5 million common shares had been in place since July 27, 2021. The stock repurchase plan authorizes management to repurchase and retire the stock at such time as repurchases and retirements are considered beneficial to the Company and shareholders. Any repurchase of stock will be made through the open market, block trades, or in privately negotiated transactions in accordance with applicable laws and regulations. Under the repurchase plan, there is no minimum number of shares that the Company is required to repurchase. There have been no repurchases during 2025 or through September 30, 2026.

Previous wording

Performance Summary. Net earnings for the second quarter of 2026 were $71.9 million, an increase of 7.9% when compared to earnings of $66.7 million for the second quarter of 2025. Diluted earnings per share was $0.50 for the second quarter of 2026 and $0.47 for the second quarter of 2025.

Current wording

Performance Summary. Net earnings for the third quarter of 2026 were $74.3 million, an increase of 42.2% when compared to earnings of $52.3 million for the third quarter of 2025. Diluted earnings per share was $0.52 for the third quarter of 2026 and $0.36 for the third quarter of 2025.

Previous wording

The return on average assets was 1.89% for both second quarters of 2026 and 2025, respectively. The return on average equity was 14.70% for the second quarter of 2026, as compared to 15.82% for the second quarter of 2025.

Current wording

The return on average assets was 1.93% for the third quarter of 2026, as compared to 1.44% for the third quarter of 2025, respectively. The return on average equity was 15.02% for the third quarter of 2026, as compared to 11.85% for the third quarter of 2025.

Previous wording

Net earnings for the six-months ended June 30, 2026 were $143.4 million, an increase of 12.1% when compared to earnings of $128.0 million for the six-months ended June 30, 2025. Diluted earnings per share was $1.00 for the first six months of 2026 and $0.89 for the first six months of 2025.

Current wording

Net earnings for the nine-months ended September 30, 2026 were $217.7 million, an increase of 20.8% when compared to earnings of $180.3 million for the nine-months ended September 30, 2025. Diluted earnings per share was $1.51 for the first nine months of 2026 and $1.26 for the first nine months of 2025.

Previous wording

The return on average assets was 1.89% for the first six months of 2026, as compared to 1.83% for the first six months of 2025. The return on average equity was 14.76% for the first six months of 2026, as compared to 15.48% for the first six months of 2025.

Current wording

The return on average assets was 1.90% for the first nine months of 2026, as compared to 1.70% for the first nine months of 2025. The return on average equity was 14.85% for the first nine months of 2026, as compared to 14.22% for the first nine months of 2025.

Previous wording

Tax-equivalent net interest income was $140.7 million for the second quarter of 2026, as compared to $126.7 million for the same period last year. The increase in tax equivalent net interest income for the second quarter of 2026 compared to the same quarter in 2025 was largely attributable to the increases in average loans and the increase in average balance and the rate of return on taxable and tax-exempt investment securities. Average earning assets were $14.5 billion for the second quarter of 2026, as compared to $13.3 billion during the second quarter of 2025. The increase of $1.1 billion in average earning assets for the second quarter of 2026 when compared to the same period in 2025 was primarily a result of (i) an increase in loans of $272.5 million, (ii) an increase in taxable investment securities of $621.1 million and (iii) an increase in tax-exempt investment securities of $276.2 million. Average interest-bearing liabilities were $9.8 billion for the second quarter of 2026, as compared to $9.0 billion in the same period in 2025. The yield on earning assets decreased 2 basis points while the rate paid on interest-bearing liabilities decreased 18 basis points for the second quarter of 2026 when compared to the second quarter of 2025.

Current wording

Tax-equivalent net interest income was $142.1 million for the third quarter of 2026, as compared to $130.4 million for the same period last year. The increase in tax equivalent net interest income for the third quarter of 2026 compared to the same quarter in 2025 was largely attributable to the increases in average loans and the increase in average balance and the rate of return on taxable investment securities. Average earning assets were $14.4 billion for the third quarter of 2026, as compared to $13.6 billion during the third quarter of 2025. The increase of $828.3 million in average earning assets for the third quarter of 2026 when compared to the same period in 2025 was primarily a result of (i) an increase in taxable investment securities of $544.1 million, and (ii) an increase in loans of $219.6 million. Average interest-bearing liabilities were $9.7 billion for the third quarter of 2026, as compared to $9.2 billion in the same period in 2025. The yield on earning assets decreased 4 basis points while the rate paid on interest-bearing liabilities decreased 22 basis points for the third quarter of 2026 when compared to the third quarter of 2025.

Previous wording

Tax-equivalent net interest income was $279.3 million for the first six months of 2026, as compared to $248.1 million for the same period last year. The increase in tax equivalent net interest income for the first half of 2026 compared to the same period in 2025 was largely attributable to the increase in average balance and the rate of return on taxable and tax-exempt investment securities, and increases in average loans. Average earning assets were $14.5 billion for the six-months ended June 30, 2026, as compared to $13.2 billion during the six-months ended June 30, 2025. The increase of $1.3 billion in average earning assets for the six-months ended June 30, 2026 when compared to the same period in 2025 was primarily a result of (i) an increase in taxable investment securities of $596.0 million, (ii) an increase in tax-exempt investment securities of $297.6 million, and (iii) an increase in loans of $296.6 million. Average interest-bearing liabilities were $9.8 billion for the six-months ended June 30, 2026, as compared to $9.0 billion in the same period in 2025. The yield on earning assets decreased 2 basis points while the rate paid on interest-bearing liabilities decreased 19 basis points for the six-months ended June 30, 2026 when compared to the same period in 2025.

Current wording

Tax-equivalent net interest income was $421.4 million for the first nine months of 2026, as compared to $378.6 million for the same period last year. The increase in tax equivalent net interest income for the first nine months of 2026 compared to the same period in 2025 was largely attributable to the increase in average balance and the rate of return on taxable and tax-exempt investment securities, and increases in average loans. Average earning assets were $14.5 billion for the nine-months ended September 30, 2026, as compared to $13.4 billion during the nine-months ended September 30, 2025. The increase of $1.1 billion in average earning assets for the nine-months ended September 30, 2026 when compared to the same period in 2025 was primarily a result of (i) an increase in taxable investment securities of $578.6 million, (ii) an increase in loans of $270.6 million and (iii) an increase in tax-exempt investment securities of $198.6 million. Average interest-bearing liabilities were $9.8 billion for the nine-months ended September 30, 2026, as compared to $9.1 billion in the same period in 2025. The yield on earning assets decreased 3 basis points while the rate paid on interest-bearing liabilities decreased 20 basis points for the nine-months ended September 30, 2026 when compared to the same period in 2025.

Previous wording

The net interest margin, on a tax equivalent basis, was 3.90% for the second quarter of 2026, an increase of 9 basis points from the same period in 2025. The net interest margin, on a tax equivalent basis, was 3.88% for the six-months ended June 30, 2026, an increase of 10 basis points from the same period in 2025. The net interest margin has expanded during the past year primarily due to (i) strong growth in deposits that has enabled the Company to deploy those funds into the higher yielding loans and securities portfolios, (ii) a reduction in cost of deposits, and (iii) investment of lower yielding securities cash flows into higher yielding bonds. The Federal Reserve began increasing interest rates in March 2022 and continuing into 2023 to a peak of 5.25% to 5.50%. Most recently, the Federal Reserve decreased interest rates by 100 basis points in 2024 and 25 basis points in September, October, and December 2025, respectively, resulting in a target rate of 3.50% to 3.75% at June 30, 2026.

Current wording

The net interest margin, on a tax equivalent basis, was 3.91% for the third quarter of 2026, an increase of 11 basis points from the same period in 2025. The net interest margin, on a tax equivalent basis, was 3.89% for the nine-months ended September 30, 2026, an increase of 10 basis points from the same period in 2025. The net interest margin has expanded during the past year primarily due to (i) strong growth in deposits that has enabled the Company to deploy those funds into the higher yielding loans and securities portfolios, (ii) a reduction in cost of deposits, and (iii) investment of lower yielding securities cash flows into higher yielding bonds. The Federal Reserve decreased interest rates by 100 basis points in 2024 and 25 basis points in September, October, and December 2025, respectively. Most recently, the Federal Reserve increased interest rates by 25 basis points in September 2026, resulting in a target rate of 3.75% to 4.00% at September 30, 2026.

Previous wording

Includes tax equivalent yield adjustment of approximately $3.8 million and $2.9 million in the second quarters of 2026 and 2025, respectively, using an effective tax rate of 21% for both periods.

Current wording

Includes tax equivalent yield adjustment of approximately $3.6 million and $3.4 million in the third quarters of 2026 and 2025, respectively, using an effective tax rate of 21% for both periods.

Previous wording

Includes tax equivalent yield adjustment of approximately $7.6 million and $5.6 million in the first half of 2026 and 2025, respectively, using an effective tax rate of 21% for both periods.

Current wording

Includes tax equivalent yield adjustment of approximately $11.2 million and $9.0 million in the first nine months of 2026 and 2025, respectively, using an effective tax rate of 21% for both periods.

Previous wording

Noninterest income for the six-months ended June 30, 2026 was $67.9 million, an increase of $4.8 million, when compared to $63.1 million in the same period in 2025. Wealth Management fee income increased to $27.3 million for the first six months of 2026 compared to $25.4 million for the first six months of 2025 driven by the increase in market value of trust assets managed. Mortgage related income increased to $9.0 million for the first six months of 2026 compared to $7.0 million for the same period in 2025 benefiting from the restructuring of the secondary mortgage department, new mortgage lenders and centralization of mortgage operations this past year and an increase in the volume of mortgage loans originated. Other noninterest income increased to $7.6 million for the first half of 2026 compared to $6.8 million for the first half of 2025. In the first half of 2026, included within other noninterest income was an increase of $899 thousand over the first half of 2025 reflecting an increase in the fair market value of the assets held in the Company's supplemental executive retirement plan as discussed above. Deferred compensation of the same amount related to these changes in value is included in salaries and employee benefits expense.

Current wording

Noninterest income for the nine-months ended September 30, 2026 was $103.6 million, an increase of $6.2 million, when compared to $97.4 million in the same period in 2025. Wealth Management fee income increased to $41.8 million for the first nine months of 2026 compared to $38.3 million for the first nine months of 2025 mostly driven by the increase in market value of trust assets managed. Mortgage related income increased to $13.1 million for the first nine months of 2026 compared to $11.3 million for the same period in 2025 benefiting from the restructuring of the secondary mortgage department, new mortgage lenders and an increase in the volume of mortgage loans originated.

Previous wording

Noninterest Expense. Total noninterest expense for the three-months ended June 30, 2026 was $81.1 million, compared to $71.7 million for the same period of 2025. An important measure in determining whether a financial institution effectively manages noninterest expense is the efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax-equivalent basis and noninterest income. Lower ratios indicate better efficiency since more income is generated with a lower noninterest expense total. Our efficiency ratio was 45.94% for the second quarter of 2026 compared to 44.97% for the same quarter in 2025.

Current wording

Noninterest Expense. Total noninterest expense for the three-months ended September 30, 2026 was $81.1 million, compared to $73.7 million for the same period of 2025. An important measure in determining whether a financial institution effectively manages noninterest expense is the efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax-equivalent basis and noninterest income. Lower ratios indicate better efficiency since more income is generated with a lower noninterest expense total. Our efficiency ratio was 45.59% for the third quarter of 2026 compared to 44.74% for the same quarter in 2025.

Previous wording

Salaries, commissions and employee benefits increased to $49.7 million for the second quarter of 2026 compared to $42.6 million for the same period in 2025. The increase from prior year is primarily resulting from annual merit-based and market-driven pay increases that were effective March 1st and profit sharing and incentive accruals, which are up due to year-over-year earnings growth. Also, there was a change in deferred compensation expense of $1.2 million from the second quarter of the prior year due to the increase in the supplemental executive retirement plan deferred compensation liability as previously discussed, which was offset by an equal amount in other noninterest income.

Current wording

Salaries, commissions and employee benefits increased to $47.8 million for the third quarter of 2026 compared to $42.6 million for the same period in 2025. The increase from prior year is primarily resulting from annual merit-based and market-driven pay increases that were effective March 1st in the current year as well as additions to staff over the past year.

Previous wording

All other categories of noninterest expense for the second quarter of 2026 totaled $31.4 million, compared to $29.2 million in the same quarter a year ago. Noninterest expense, excluding salary related costs, for the three-months ended June 30, 2026 increased when compared to the same period in 2025 largely due to increases in software amortization and expense and professional and service fees and offset by decreases in equipment and debit card expenses.

Current wording

All other categories of noninterest expense for the third quarter of 2026 totaled $33.2 million, compared to $31.1 million in the same quarter a year ago. Noninterest expense, excluding salary related costs, for the three-months ended September 30, 2026 increased when compared to the same period in 2025 largely due to increases in professional fees, and software amortization and expense offset by decreases in operational and other losses and debit card expenses.

Previous wording

Total noninterest expense for the six-months ended June 30, 2026 was $157.9 million, compared to $142.1 million for the same period of 2025. Our efficiency ratio was 45.47% for the first six months of 2026 compared to 45.65% during the same period in 2025.

Current wording

Total noninterest expense for the nine-months ended September 30, 2026 was $238.9 million, compared to $215.7 million for the same period of 2025. Our efficiency ratio was 45.51% for the first nine months of 2026 compared to 45.33% during the same period in 2025.

Previous wording

Salaries, commissions and employee benefits for the six-months ended June 30, 2026 totaled $95.6 million, compared to $84.7 million for the same period in 2025.The increase from prior year is primarily resulting from annual merit-based and market-driven pay increases that were effective March 1st and profit sharing and incentive accruals, which are up due to year-over-year earnings growth. Mortgage incentives are also up due to higher loan volumes. Also, there was a change in deferred compensation expense of $899 thousand from the second quarter of the prior year due to the increase in the supplemental executive retirement plan deferred compensation liability as previously discussed, which was offset by an equal amount in other noninterest income.

Current wording

Salaries, commissions and employee benefits for the nine-months ended September 30, 2026 totaled $143.5 million, compared to $127.3 million for the same period in 2025. The increase from prior year is primarily resulting from annual merit-based and market-driven pay increases that were effective March 1st in the current year as well as additions to staff over the past year.

Previous wording

All other categories of noninterest expense for the six-months ended June 30, 2026 totaled $62.2 million, compared to $57.4 million in the same period a year ago. Noninterest expense, excluding salary related costs, for the six-months ended June 30, 2026 increased when compared to the same period in 2025 largely due to increases in software amortization and expense and professional and service fees partially offset by decreases in debit card and equipment expenses.

Current wording

All other categories of noninterest expense for the nine-months ended September 30, 2026 totaled $95.5 million, compared to $88.4 million in the same period a year ago. Noninterest expense, excluding salary related costs, for the nine-months ended September 30, 2026 increased when compared to the same period in 2025 largely due to increases in software amortization and expense and professional and service fees partially offset by decreases in debit card expenses.

Previous wording

Loans. The portfolio is comprised of loans made to businesses, professionals, municipalities, individuals, and farm and ranch operations primarily in the trade areas served by our subsidiary bank. As of June 30, 2026, total loans held-for-investment were $8.3 billion, an increase of $188.7 million, as compared to December 31, 2025 balances.

Current wording

Loans. The portfolio is comprised of loans made to businesses, professionals, municipalities, individuals, and farm and ranch operations primarily in the trade areas served by our subsidiary bank. As of September 30, 2026, total loans held-for-investment were $8.5 billion, an increase of $380.5 million, as compared to December 31, 2025 balances.

Previous wording

As compared to year-end 2025 balances, total real estate loans increased $108.8 million, total commercial loans increased $47.8 million, total consumer loans increased $46.0 million, and agricultural loans decreased $14.0 million. Loans averaged $8.3 billion for the second quarter of 2026, an increase of $272.5 million over the prior year second quarter average balances. Loans averaged $8.3 billion for the first six months of 2026, an increase of $296.6 million from the average balance during the first six months of 2025.

Current wording

As compared to year-end 2025 balances, total real estate loans increased $153.8 million, total commercial loans increased $150.0 million, total consumer loans increased $92.8 million, and agricultural loans decreased $16.0 million. Loans averaged $8.5 billion for the third quarter of 2026, an increase of $219.6 million over the prior year third quarter average balances. Loans averaged $8.4 billion for the first nine months of 2026, an increase of $270.6 million from the average balance during the first nine months of 2025.

Previous wording

Loans held-for-sale, consisting of secondary market mortgage loans, totaled $23.6 million and $30.0 million at June 30, 2026 and December 31, 2025, respectively. At June 30, 2026 and December 31, 2025, $4.7 million and $4.6 million, respectively, are valued using the lower of cost or fair value, and the remaining amounts are valued under the fair value option.

Current wording

Loans held-for-sale, consisting of secondary market mortgage loans, totaled $25.5 million and $30.0 million at September 30, 2026 and December 31, 2025, respectively. At September 30, 2026 and December 31, 2025, $4.4 million and $4.6 million, respectively, are valued using the lower of cost or fair value, and the remaining amounts are valued under the fair value option.

Previous wording

Commercial real estate loans (owner and non-owner occupied CRE) represent 23.7% of the Company's total loan portfolio as of June 30, 2026. Non-owner occupied CRE represents $831.9 million, or 10.0%, of the Company's total loan portfolio as of June 30, 2026. The properties securing this portfolio are diverse as to geographic location in Texas as well as industry type. Collateral for CRE loans is located throughout the Company’s markets in central west Texas, the Dallas-Fort Worth metroplex and southeast Texas with less than 1% of properties located outside of the state. The largest concentrations in the CRE portfolio as to type are industrial/manufacturing at approximately 18.5% and multi-tenant retail at approximately 7.9% as of June 30, 2026. All additional property CRE portfolio property type categories are below the identified concentration levels. Credit underwriting standards are periodically reviewed and adjusted based upon observations from our ongoing monitoring of economic conditions in our lending areas. In response to the current interest rate environment, the Company has enhanced stress testing and loan review activities to mitigate interest rate reprice risk with a specific emphasis on borrowers’ abilities to absorb the impact of higher interest rates as loans that were made in a much lower rate environment renew.

Current wording

Commercial real estate loans (owner and non-owner occupied CRE) represent 24.4% of the Company's total loan portfolio as of September 30, 2026. Non-owner occupied CRE represents $919.8 million, or 10.8%, of the Company's total loan portfolio as of September 30, 2026. The properties securing this portfolio are diverse as to geographic location in Texas as well as industry type. Collateral for CRE loans is located throughout the Company’s markets in central west Texas, the Dallas-Fort Worth metroplex and southeast Texas with less than 1% of properties located outside of the state. The largest concentrations in the CRE portfolio as to type are industrial/manufacturing at approximately 18.1% and multi-tenant retail at approximately 7.7% as of September 30, 2026. All additional property CRE portfolio property type categories are below the identified concentration levels. Credit underwriting standards are periodically reviewed and adjusted based upon observations from our ongoing monitoring of economic conditions in our lending areas. In response to the current interest rate environment, the Company has enhanced stress testing and loan review activities to mitigate interest rate reprice risk with a specific emphasis on borrowers’ abilities to absorb the impact of higher interest rates as loans that were made in a much lower rate environment renew.

Previous wording

Of the $4.8 billion of variable interest rate loans shown above, loans totaling $2.4 billion mature or reprice over the next twelve months. Of this amount, approximately $1.8 billion will reprice immediately upon changes in the underlying index rate (primarily U.S. prime rate) with the remaining $598.4 million being subject to floors above or ceilings below the current index.

Current wording

Of the $4.9 billion of variable interest rate loans shown above, loans totaling $2.5 billion mature or reprice over the next twelve months.

Previous wording

Asset Quality. Our loan portfolio is subject to periodic reviews by our centralized independent loan review group, engaged third-parties, as well as periodic examinations by bank regulatory agencies. Loans are placed on nonaccrual status when, in the judgment of management, the collectability of principal or interest under the original terms becomes doubtful. Nonaccrual, past due 90 days or more and still accruing, and foreclosed assets were $67.0 million at June 30, 2026, as compared to $56.5 million at December 31, 2025. As a percent of loans held-for-investment and foreclosed assets, these assets were 0.80% at June 30, 2026 and 0.69% at December 31, 2025. As a percent of total assets, these assets were 0.44% at June 30, 2026, as compared to 0.37% at December 31, 2025, respectively. We believe the level of these assets to be manageable and are not aware of any material classified credits not properly disclosed as nonperforming at June 30, 2026.

Current wording

Asset Quality. Our loan portfolio is subject to periodic reviews by our centralized independent loan review group, engaged third-parties, as well as periodic examinations by bank regulatory agencies. Loans are placed on nonaccrual status when, in the judgment of management, the collectability of principal or interest under the original terms becomes doubtful. Nonaccrual, past due 90 days or more and still accruing, and foreclosed assets were $60.5 million at September 30, 2026, as compared to $56.5 million at December 31, 2025. As a percent of loans held-for-investment and foreclosed assets, these assets were 0.71% at September 30, 2026 and 0.69% at December 31, 2025. As a percent of total assets, these assets were 0.40% at September 30, 2026, as compared to 0.37% at December 31, 2025, respectively. We believe the level of these assets to be manageable and are not aware of any material classified credits not properly disclosed as nonperforming at September 30, 2026.

Previous wording

The provision for loan losses of $3.9 million for the three-months ended June 30, 2026 is combined with the provision for unfunded commitments of $268 thousand and reported in the net aggregate of $4.2 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended June 30, 2026. The provision for loan losses of $6.7 million for the six-months ended June 30, 2026 is combined with the provision reversal for unfunded commitments of $179 thousand and reported in the net aggregate of $6.5 million under the provision for credit losses in the consolidated statements of earnings for the six-months ended June 30, 2026.

Current wording

The provision for loan losses of $2.4 million for the three-months ended September 30, 2026 is combined with the provision reversal for unfunded commitments of $360 thousand and reported in the net aggregate of $2.0 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended September 30, 2026. The provision for loan losses of $9.0 million for the nine-months ended September 30, 2026 is combined with the provision reversal for unfunded commitments of $539 thousand and reported in the net aggregate of $8.5 million under the provision for credit losses in the consolidated statements of earnings for the nine-months ended September 30, 2026.

Previous wording

The provision for loan losses of $2.4 million for the three-months ended June 30, 2025 is combined with the provision for unfunded commitments of $700 thousand and reported in the net aggregate of $3.1 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended June 30, 2025. The provision for loan losses of $5.4 million for the six-months ended June 30, 2025 is combined with the provision for unfunded commitments of $1.2 million and reported in the net aggregate of $6.7 million under the provision for credit losses in the consolidated statements of earnings for the six-months ended June 30, 2025.

Current wording

The provision for loan losses of $25.5 million for the three-months ended September 30, 2025 is combined with the provision reversal for unfunded commitments of $1.1 million and reported in the net aggregate of $24.4 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended September 30, 2025. The provision for loan losses of $30.9 million for the nine-months ended September 30, 2025 is combined with the provision for unfunded commitments of $165 thousand and reported in the net aggregate of $31.1 million under the provision for credit losses in the consolidated statements of earnings for the nine-months ended September 30, 2025.

Previous wording

As a percent of average loans, annualized net recoveries were 0.03% for the three-months ended June 30, 2026, as compared to annualized net charge-offs of 0.04% for the three-months ended June 30, 2025. For the six-months ended June 30, 2026 and 2025, annualized net recoveries were 0.01% and annualized net charge-offs of 0.02%, respectively. The allowance for credit losses as a percent of loans held-for-investment was 1.35% as of June 30, 2026, as compared to 1.29% for December 31, 2025.

Current wording

As a percent of average loans, annualized net charge-offs were 0.04% for the three-months ended September 30, 2026, as compared to annualized net charge-offs of 1.07% for the three-months ended September 30, 2025. For the nine-months ended September 30, 2026 and 2025, annualized net charge-offs were 0.01% and 0.39%, respectively. The third quarter of 2025 was impacted by a $21.6 million credit loss due to borrower fraud. The allowance for credit losses as a percent of loans held-for-investment was 1.33% as of September 30, 2026, as compared to 1.29% for December 31, 2025.

Previous wording

Interest-Bearing Demand Deposits in Banks. The Company had interest-bearing deposits in banks of $287.0 million at June 30, 2026 compared to $826.9 million at December 31, 2025. At June 30, 2026, interest-bearing deposits in banks included $273.7 million maintained at the Federal Reserve Bank of Dallas and $13.2 million on deposit with the FHLB.

Current wording

Interest-Bearing Demand Deposits in Banks. The Company had interest-bearing deposits in banks of $292.8 million at September 30, 2026 compared to $826.9 million at December 31, 2025. At September 30, 2026, interest-bearing deposits in banks included $231.9 million maintained at the Federal Reserve Bank of Dallas and $60.9 million on deposit with the FHLB.

Previous wording

Available-for-Sale Securities. At June 30, 2026, securities with a fair value of $5.7 billion were classified as securities available-for-sale. As compared to December 31, 2025, the available-for-sale portfolio at June 30, 2026 reflected (i) an increase of $229.4 million in mortgage-backed securities, (ii) an increase of $2.5 million in obligations of states and political subdivisions, (iii) a decrease of $60.8 million in U.S. Treasury securities, and (iv) a decrease of $9.3 million in corporate bonds and other securities. Fluctuations in the available-for-sale securities portfolio balances were primarily driven by purchases and calls or maturities, and changes in unrealized losses during the first six-months of 2026. Our mortgage related securities are backed by GNMA, FNMA or FHLMC, or are collateralized by securities backed by these agencies.

Current wording

Available-for-Sale Securities. At September 30, 2026, securities with a fair value of $5.4 billion were classified as securities available-for-sale. As compared to December 31, 2025, the available-for-sale portfolio at September 30, 2026 reflected (i) an increase of $211.7 million in mortgage-backed securities, (ii) a decrease of $277.2 million in obligations of states and political subdivisions, (iii) a decrease of $60.8 million in U.S. Treasury securities, and (iv) an increase of $197 thousand in corporate bonds and other securities. Fluctuations in the available-for-sale securities portfolio balances were primarily driven by purchases and sales, calls or maturities, and changes in unrealized losses during the first nine-months of 2026. Our mortgage related securities are backed by GNMA, FNMA or FHLMC, or are collateralized by securities backed by these agencies.

Previous wording

As of June 30, 2026, the investment portfolio had an overall tax equivalent yield of 3.22%, a weighted average life of 6.3 years and modified duration of 5.3 years.

Current wording

As of September 30, 2026, the investment portfolio had an overall tax equivalent yield of 3.27%, a weighted average life of 7.5 years and modified duration of 5.9 years.

Previous wording

Table 9 provides a breakdown of average deposits and rates paid over the three and six-months ended June 30, 2026 and 2025 respectively.

Current wording

Table 9 provides a breakdown of average deposits and rates paid over the three and nine-months ended September 30, 2026 and 2025 respectively.

Previous wording

The estimated amount of uninsured and uncollateralized deposits including related accrued and unpaid interest is approximately $4.0 billion, or 30.5% of total deposits, as of June 30, 2026.

Current wording

The estimated amount of uninsured and uncollateralized deposits including related accrued and unpaid interest is approximately $4.3 billion, or 32.9% of total deposits, as of September 30, 2026.

Previous wording

Borrowings. Included in borrowings were federal funds purchased, advances from the FHLB and other borrowings of $21.8 million and $21.7 million at June 30, 2026 and December 31, 2025, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $28.5 million and $26.6 million in the second quarters of 2026 and 2025, respectively. The weighted average interest rates paid on these borrowings were 1.76% and 1.93% for the second quarters of 2026 and 2025, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $25.3 million and $50.4 million in the first half of 2026 and 2025, respectively. The weighted average interest rates paid on these borrowings were 1.59% and 2.76% for the first half of 2026 and 2025, respectively.

Current wording

Borrowings. Included in borrowings were federal funds purchased, advances from the FHLB and other borrowings of $21.9 million and $21.7 million at September 30, 2026 and December 31, 2025, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $22.7 million and $56.2 million in the third quarters of 2026 and 2025, respectively. The weighted average interest rates paid on these borrowings were 1.42% and 3.33% for the third quarters of 2026 and 2025, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $24.4 million and $52.4 million in the first nine months of 2026 and 2025, respectively. The weighted average interest rates paid on these borrowings were 1.53% and 2.96% for the first nine months of 2026 and 2025, respectively.

Previous wording

Repurchase Agreements. Securities sold under repurchase agreements of $53.7 million and $63.0 million at June 30, 2026, and December 31, 2025, respectively. Securities sold under repurchase agreements are generally with significant customers of the Company that require short-term liquidity for their funds for which we pledge certain securities that have a fair value equal to at least the amount of the short-term borrowings. The average balances of securities sold under repurchase agreements were $60.4 million and $54.5 million for the second quarters of 2026 and 2025, respectively. The average rates paid on securities sold under repurchase agreements were 1.48% and 1.63% for the second quarters of 2026 and 2025, respectively. The average balances of securities sold under repurchase agreements were $61.6 million and $54.2 million for the first half of 2026 and 2025, respectively. The average rates paid on securities sold under repurchase agreements were 1.48% and 1.60% for the first half of 2026 and 2025, respectively

Current wording

Repurchase Agreements. Securities sold under repurchase agreements of $43.1 million and $63.0 million at September 30, 2026, and December 31, 2025, respectively. Securities sold under repurchase agreements are generally with significant customers of the Company that require short-term liquidity for their funds for which we pledge certain securities that have a fair value equal to at least the amount of the short-term borrowings. The average balances of securities sold under repurchase agreements were $57.9 million and $50.1 million for the third quarters of 2026 and 2025, respectively. The average rates paid on securities sold under repurchase agreements were 1.41% and 1.66% for the third quarters of 2026 and 2025, respectively. The average balances of securities sold under repurchase agreements were $60.4 million and $52.8 million for the first nine months of 2026 and 2025, respectively. The average rates paid on securities sold under repurchase agreements were 1.46% and 1.62% for the first nine months of 2026 and 2025, respectively.

Previous wording

The fair value of our investment securities classified as available-for-sale totaled $5.7 billion at June 30, 2026. During the six months ended June 30, 2026, the corresponding unrealized loss before taxes of $342.0 million at December 31, 2025, changed to an unrealized loss before taxes of $354.4 million at June 30, 2026, which is recorded net of taxes in accumulated other comprehensive earnings (loss) in shareholders' equity. The unrealized gains or losses, net of taxes, on the portfolio are excluded from the calculation of all regulatory capital ratios. The changes in the fair value were driven by changes in interest rates based on expected actions by the Federal Reserve Board and other market conditions. The overall valuation of the portfolio is most correlated to the 5-year U.S. Treasury rates based on the composition and duration of the portfolio. At June 30, 2026, the 5-year U.S. Treasury rate was 4.19% compared to 3.72% at December 31, 2025, representing a 47 basis point increase during the first six months of 2026. As of June 30, 2026, an increase of 100 basis points in the 5-year U.S. Treasury rate would result in an increase to unrealized losses by approximately $260 million before taxes, while a 100 basis point decrease in the same rate would result in a decrease to unrealized losses by approximately $220 million before taxes. Management does not have the intent to sell impaired available-for-sale securities before fair value recovers to the current amortized cost, and it is more-likely-than-not that the Company will not be required to sell impaired securities before the fair value recovers, which may be maturity.

Current wording

The fair value of our investment securities classified as available-for-sale totaled $5.4 billion at September 30, 2026. During the nine months ended September 30, 2026, the corresponding net unrealized loss before taxes of $342.0 million at December 31, 2025, changed to a net unrealized loss before taxes of $620.2 million at September 30, 2026, which is recorded net of taxes in accumulated other comprehensive earnings (loss) in shareholders' equity. The unrealized gains or losses, net of taxes, on the portfolio are excluded from the calculation of all regulatory capital ratios. The changes in the fair value were driven by changes in interest rates based on expected actions by the Federal Reserve Board and other market conditions. The overall valuation of the portfolio is most correlated to the 5-year U.S. Treasury rates based on the composition and duration of the portfolio. At September 30, 2026, the 5-year U.S. Treasury rate was 5.09% compared to 3.72% at December 31, 2025, representing a 137 basis point increase during the first nine months of 2026. As of September 30, 2026, an increase of 100 basis points in the 5-year U.S. Treasury rate would result in an increase to unrealized losses by approximately $284 million before taxes, while a 100 basis point decrease in the same rate would result in a decrease to unrealized losses by approximately $262 million before taxes. Management does not have the intent to sell impaired available-for-sale securities before fair value recovers to the current amortized cost, and it is more-likely-than-not that the Company will not be required to sell impaired securities before the fair value recovers, which may be maturity.

Previous wording

Total shareholders’ equity was $2.0 billion, or 13.0% of total assets at June 30, 2026, as compared to $1.9 billion, or 12.4% of total assets at December 31, 2025. Included in shareholders' equity at June 30, 2026 and December 31, 2025 were $279.7 million and $269.9 million, respectively, in unrealized losses on investment securities available-for-sale, net of related income taxes, although such amount is excluded from and does not impact regulatory capital. For the second quarter of 2026, total shareholders' equity averaged $2.0 billion, or 12.8% of average assets, as compared to $1.7 billion, or 11.9% of average assets, during the same period in 2025. For the first six months of 2026, total shareholders' equity averaged $2.0 billion, or 12.8% of average assets, as compared to $1.7 billion or 11.8% of average assets, during the same period in 2025.

Current wording

Total shareholders’ equity was $1.8 billion, or 12.1% of total assets at September 30, 2026, as compared to $1.9 billion, or 12.4% of total assets at December 31, 2025. Included in shareholders' equity at September 30, 2026 and December 31, 2025 were $489.6 million and $269.9 million, respectively, in unrealized losses on investment securities available-for-sale, net of related income taxes, although such amount is excluded from and does not impact regulatory capital. For the third quarter of 2026, total shareholders' equity averaged $2.0 billion, or 12.8% of average assets, as compared to $1.7 billion, or 12.1% of average assets, during the same period in 2025. For the first nine months of 2026, total shareholders' equity averaged $2.0 billion, or 12.8% of average assets, as compared to $1.7 billion or 11.9% of average assets, during the same period in 2025.

Previous wording

Beginning in January 2015, under the Basel III rules, the implementation of the capital conservation buffer was effective for the Company starting at the 0.625% level and increasing 0.625% each year thereafter, until it reached 2.50% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress and requires increased capital levels for the purpose of capital distributions and other payments. Failure to meet the amount of the buffer will result in restrictions on the Company’s ability to make capital distributions, including dividend payments and stock repurchases, and to pay discretionary bonuses to executive officers.

Current wording

Under the Basel III rules, the Company must maintain a capital conservation buffer of 2.50%. The capital conservation buffer is designed to absorb losses during periods of economic stress and requires increased capital levels for the purpose of capital distributions and other payments. Failure to meet the amount of the buffer will result in restrictions on the Company’s ability to make capital distributions, including dividend payments and stock repurchases, and to pay discretionary bonuses to executive officers.

Previous wording

As of June 30, 2026 and December 31, 2025, we had a total risk-based capital ratio of 21.62% and 21.17%, a Tier 1 capital to risk-weighted assets ratio of 20.40% and 19.99%, and a common equity Tier 1 to risk-weighted assets ratio of 20.40% and 19.99%, and a Tier 1 leverage ratio of 12.88% and 12.55%, respectively. The regulatory capital ratios as of June 30, 2026 and December 31, 2025 were calculated under Basel III rules.

Current wording

As of September 30, 2026 and December 31, 2025, we had a total risk-based capital ratio of 21.66% and 21.17%, a Tier 1 capital to risk-weighted assets ratio of 20.45% and 19.99%, and a common equity Tier 1 to risk-weighted assets ratio of 20.45% and 19.99%, and a Tier 1 leverage ratio of 13.12% and 12.55%, respectively. The regulatory capital ratios as of September 30, 2026 and December 31, 2025 were calculated under Basel III rules.

Previous wording

Liquidity. Liquidity management involves our ability to convert assets to cash to meet our current and future obligations to customers at any time. Such needs can develop from loan demand, deposit withdrawals or acquisition opportunities. Potential obligations resulting from the issuance of standby letters of credit and commitments to fund future borrowings to our loan customers are other factors affecting our liquidity needs. Many of these obligations and commitments are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements affecting our liquidity position. The potential need for liquidity arising from these types of financial instruments is represented by the contractual notional amount of the instrument. Asset liquidity is provided by cash and assets which are readily marketable, or which will mature in the near future. Liquid assets include cash, federal funds sold, and short-term investments in time deposits in banks. Liquidity is also provided by access to funding sources, which include core depositors and correspondent banks that maintain accounts with and sell federal funds to our subsidiary bank. Other sources of funds include our ability to borrow from short-term sources, such as purchasing federal funds from correspondent banks, sales of securities under agreements to repurchase and other borrowings (see below) and an unfunded $50 million revolving line of credit established with Frost Bank, a nonaffiliated bank, which matures on June 30, 2027 (see next paragraph). Our subsidiary bank also has federal funds purchased lines of credit with two non-affiliated banks totaling $175 million. At June 30, 2026, there were no amounts drawn on these lines of credit. Our subsidiary bank also has (i) an available line of credit with the FHLB totaling $2.3 billion at June 30, 2026, secured by portions of our loan portfolio and certain investment securities, and (ii) access to approximately $1.6 billion at the Federal Reserve Bank of Dallas Discount Window lending program secured by portions of certain investment securities and portions of our loan portfolio. At June 30, 2026, there was $668.0 million used on the FHLB line advance for undisbursed commitments (letters of credit) used to secure public funds.

Current wording

Liquidity. Liquidity management involves our ability to convert assets to cash to meet our current and future obligations to customers at any time. Such needs can develop from loan demand, deposit withdrawals or acquisition opportunities. Potential obligations resulting from the issuance of standby letters of credit and commitments to fund future borrowings to our loan customers are other factors affecting our liquidity needs. Many of these obligations and commitments are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements affecting our liquidity position. The potential need for liquidity arising from these types of financial instruments is represented by the contractual notional amount of the instrument. Asset liquidity is provided by cash and assets which are readily marketable, or which will mature in the near future. Liquid assets include cash, federal funds sold, and short-term investments in time deposits in banks. Liquidity is also provided by access to funding sources, which include core depositors and correspondent banks that maintain accounts with and sell federal funds to our subsidiary bank. Other sources of funds include our ability to borrow from short-term sources, such as purchasing federal funds from correspondent banks, sales of securities under agreements to repurchase and other borrowings (see below) and an unfunded $50 million revolving line of credit established with Frost Bank, a nonaffiliated bank, which matures on June 30, 2027 (see next paragraph). Our subsidiary bank also has federal funds purchased lines of credit with two non-affiliated banks totaling $175 million. At September 30, 2026, there were no amounts drawn on these lines of credit. Our subsidiary bank also has (i) an available line of credit with the FHLB totaling $2.3 billion at September 30, 2026, secured by portions of our loan portfolio and certain investment securities, and (ii) access to approximately $1.8 billion at the Federal Reserve Bank of Dallas Discount Window lending program secured by portions of certain investment securities and portions of our loan portfolio. At September 30, 2026, there was $678.0 million used on the FHLB line advance for undisbursed commitments (letters of credit) used to secure public funds.